The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Eight budget cuts that would help poor people

Posted by

Cutting one thing rather than another is a way that policy-makers express their values, vision, and priorities. Here are eight ideas that would save taxpayer money and might also help poor people in developing countries.

Congress and the President have dodged a bullet with a short-term deal to keep the government running through March 18. But the negotiations around budgets and spending promise to be a prominent feature of the political discussion through 2011.

Budgeting is a blunt tool to make policy – and yet it’s one the most common ways that it’s done. Cutting one thing rather than another is a way that policy-makers express their values, vision, and priorities. Congress and the President should be looking for budget cuts that can deliver secondary benefits. Here are eight ideas that would save taxpayer money and might also help poor people in developing countries. Please note: some of these ideas are provocative and don’t reflect the official policy of Oxfam (yet).

1. Cut Farm commodity subsidies. Although agricultural commodity prices are high today, and farm income and farm land prices are at all-time highs, US farm subsidies typically cost taxpayers $15b a year. There’s a dazzling array of overlapping and confusing farm programs and payments, but many of them encourage farmers to overproduce, which distorts markets and creates an unfair competition with the 3 billion farmers around the world, many of them very poor. Cutting these down to size would be progress all around.

2. Cut ethanol subsidies. Ethanol is made from corn. Corn is what American agriculture does: the US produces one-third of the world’s corn and is by far the world’s biggest exporter. But subsidies have been relentlessly driving more of this massive harvest from food and feed markets into energy; ethanol to be burned in gas tanks. Burning corn as ethanol is driving prices up and creating instability in food markets. As food prices are hitting all time highs, driving more than 40 million people into poverty, it’s time the US hit the brakes. There are several redundant mandates and subsidies that drive ethanol. Cutting the $6b tax credit for blending ethanol into gasoline is the place to start. A wide and diverse coalition of interests supports this idea.

3. Cut fossil fuel subsidies. Oil prices are high again. Isn’t it redundant and unnecessary to subsidize the oil industry? Even more important, don’t these subsidies speed up climate change by promoting dirty carbon- spewing industries and technologies? Spending taxpayer dollars to support fuels that have negative externalities seems insane. And climate change is certain to make the lives for poor and vulnerable people harder. Oil, gas and coal subsidies total something like $10b annually. Friends of the Earth does a nice job of listing out the specific measures to cut in their Green Scissors report.

4. US workplace raids for immigration enforcement: Budget austerity means that we just can’t afford to enforce all our laws and regulations with the same vigor. Congress is proposing major cuts to important consumer and financial regulatory agencies. Rather than jeopardizing food safety oversight at the FDA until the US gets its fiscal house in order, it makes more sense to suspend the workplace raids and heavy-handed “show me your papers” enforcement of employment. These enforcement actions capture people who want to work and are contributing productively to society. That seems like a low priority compared to enforcing the law on criminals who are doing real damage to society, or the economy, or protecting our food supply. Cutting workplace raids and enforcement wouldn’t impact the enforcement programs oriented to apprehension, prosecution, and deportation of immigrants who commit crimes. And immigrants working in the US are major contributors to the economic well-being of their families back home in Mexico, Central America, or all around the world. Very rough estimate: $30m from U.S. Immigration and Customs Enforcement in the Department of Homeland Security.

5. Food aid: as much as half the US food aid budget is lost to unnecessary and wasteful bureaucratic restrictions on how the program is run. Congress has imposed laws that make the program inflexible and slow to respond to emergencies and urgent food crises. A rough estimate is that $3-400m could be saved on the roughly $2b annual food aid budget with some pretty simple reforms: let food aid administrators buy the cheapest food and ship it on the cheapest transport. In good conscience, I can’t really recommend cutting the food aid budget – there are still millions of people who could use the help. But the program could be much more efficient and effective at current funding levels.

6. Market Access Program: The US Department of Agriculture runs an export promotion program that subsidizes foreign marketing that benefits mega companies like Sunkist, Tyson Foods, Monsanto, and Archer Daniels Midland. It’s hard to see why these companies need taxpayer assistance for their fashion shows, pet manuals, and Mexican cooking classes, nor why consumers in other countries need all this. This is yet another program that advantages US exporters and producers, and subverts the fair competition with other exporters and producers, including those in developing countries. The program promotes American cotton in India, the world’s second-biggest cotton producer with 15 million cotton farmers. Cutting the program saves about $200m year.

7. Commander’s Emergency Response Program (CERP): There’s $5 billion slush fund in the Department of Defense budget that is described – without irony – as “money as a weapon”. At best, these funds are used for short-term projects that help support military missions. At worst, they undermine sustainable development and the longer-term political goal of nurturing competent, responsive, accountable political systems. Too often, these funds are used for poorly-conceived, expensive projects that have little life beyond CERP funding, including water parks,and are a monumental waste of money.

8. International IP enforcement: Times are tough. Major corporations and patent-holders get a Cadillac service from the US government protecting their interests overseas. Through the office of the US Trade Representative, the US government does research, extensive reviews, and all kinds of diplomatic saber-rattling to get other countries to respect and enforce the presumed intellectual property rights of US companies. This isn’t “trade” exactly because goods and services aren’t really crossing borders. It’s not clear what economic benefit this has for the US, although it’s pretty well understood that it makes technologies, consumer products, and medicines more expensive in developing countries. Cutting this service could save some dough, would clarify the US government’s role, and might make life better in poorer countries. Best guestimate: $5-10m savings.

Share this story:

Join the conversation

Leave a Reply

Your email address will not be published. Required fields are marked *